BCFP Enters Into Consent Order with “Branchless” Bank over FCRA Violations
The Bureau of Consumer Financial Protection recently entered into a consent order with a bank over alleged violations of the Fair Credit Reporting Act (FCRA) related to improperly obtaining credit reports, the reporting of inaccurate and disputed information, and a lack of reasonable written policies and procedures.
The bank did not maintain retail branches, but instead marketed and offered its products and services through a network of independent insurance agencies whose agents were also bank-certified. Its primary lines of business were offering credit cards and auto loans, including refinancing for existing auto loans. The Bureau alleged that the bank’s agents would initiate loan applications for consumers who never requested them in order to learn about and then solicit them as customers, which would trigger a credit inquiry. Additionally, the bank’s agents would sometimes initiate credit applications for the wrong consumer—such as by incorrectly inputting consumer information into the bank’s application system or by selecting the wrong consumer from a list of possible consumers identified in the system—which would result in a credit check on the wrong person, as opposed to the consumer who was actually seeking the credit product. In both cases, the bank was not pulling the credit reports for a permissible purpose, which is prohibited by FCRA. Additionally, the bank lacked reasonable written policies and procedures to guide its agents as to when and how they should conduct credit checks.
Further, the bank occasionally furnished inaccurate information to the credit bureaus, such as by submitting account information for the wrong consumer, reporting current accounts as delinquent, and reporting inaccurate payment histories and past-due amounts. The bank would also submit information which was disputed by the consumer to the credit bureaus, but would fail to report the fact that the consumer disputed the information. Here too, the Bureau alleged that the bank’s written policies and procedures regarding the accuracy and integrity of the information that it furnished to the credit bureaus were inadequate given the high volume, complexity, and scope of the bank’s credit reporting activities.
Under the Consent Order, the bank was not required to pay any monetary penalty and did not need to admit or deny liability. Instead, the bank is required to: 1) implement new, comprehensive written policies and procedures; 2) develop and implement a new compliance plan which is to be approved by the Bureau; 3) increase the involvement of the bank’s board of directors in the implementation of the Consent Order and in compliance matters; and 4) engage in additional compliance monitoring, recordkeeping, and reporting requirements.
To view a copy of the Consent Order as well as the Bureau’s press release, click here.
